There’s no doubt that the marijuana industry is gaining traction, with our own index trading up 85.73% so far this year. With increasing favorable government regulations, public companies like GrowLife Inc. (OTCQB: PHOT), HEMP Inc. (OTCQB: HEMP), Medical Marijuana Inc. (OTCQB: MJNA), MedBox Inc. (OTCQB: MDBX), Cannabis Sciences Inc. (OTCQB: CBIS) and MediSwipe Inc. (OTCQB: MWIP) have all seen strong gains over the past few months.
Rapidly Improving Regulatory Outlook
The November 2012 elections may have started the trend towards marijuana acceptance, but governments have just recently started inking the new laws. Recently, New York City became the latest city to announce that it would no longer arrest individuals on possession of marijuana, if they can provide an ID and do not have any outstanding warrants. This will allow NYPD to focus on catching criminals, and not continue to spend endless resources incarcerating people for laws that many see as outdated. New York Governor Andrew Cuomo also intends to introduce a statewide bill decriminalizing possession under 15 grams with mayor Bloomberg’s support.
The move follows many other trends towards the relaxation or decriminalization of marijuana on the part of state and local governments. In December, Colorado Governor John Hickenlooper signed an executive order formalizing Amendment 64 as part of the state’s constitution, making it legal for those over 21 years old to possess up to one ounce of marijuana and grow up to six marijuana plants in their homes, as long as they don’t sell or transfer the drug.
Federal Government Could be Next
While U.S. drug czar Gil Kerlikowske recently told a Canadian newspaper that federal prosecutors would crack down on recreational marijuana dispensaries and growers even in states like Colorado and Washington, individuals and companies have begun to wonder aloud just how long the federal government can take such a conservative stance in clear opposition to the popular vote and decisions of many state and local governments on the issue.
Even one time avid opponents such as former U.S. Attorney Mel McDonald, appointed by the “just say no” Ronald Reagan, have become staunch advocates of the drugs medicinal properties after having seen its effects firsthand. In a YouTube video McDonald says, “…Do not criminalize people that are desperately needing medicine to help them eat and remain alive. Don’t criminalize it and force people like my wife to go underground and to commit crimes to spare the life of her son.” McDonald continues by saying, “What I’ve tried to do is to become a vocal proponent that this is not contrived. You don’t have to be riding a skateboard with long hair and be a hippy to realize that there are genuine people that need this. And people that take efforts to block it … [are] just wrong.”
Federal level politicians may also be catching on sooner than later. Members of Congress proposed bills last week to regulate and tax marijuana like Alcohol in states where it’s legal, while other bills proposed simply exempting those states with marijuana laws from the U.S. Controlled Substances Act. Either way, these actions would take away the ability for federal prosecutors to go after marijuana growers in these states and pave the way for businesses.
Marijuana Business Poised to Profit
The marijuana world may be filled with sketchy players at the moment, ranging from shady back-alley dealers to head shops offering on-site “prescriptions”, but the business landscape is rapidly changing as legal frameworks develop. Already, several public companies in the space have built up very legitimate businesses designed to capitalize on the sector’s potentially explosive growth, ranging from marijuana retailers to technology providers.
GrowLife Inc. (OTCQB: PHOT) is a premiere player in the growing space that provides indoor growing technologies to both consumer and commercial end markets. Since the selling of indoor growing equipment isn’t illegal under any laws, and thus can be transported across state and international boundaries, the company has been able to benefit from the market’s rapid growth without getting involved in anything questionable. That means GrowLife is not limited to selling their products in just Colorado or Washington, as some companies are, but rather quite literally have the entire world at their fingertips via their online hydroponic superstore, www.greners.com. The result has been revenues that soared 120% last quarter to $475,870 and gross profit that jumped 30.7% to $159,680.
Expanding Market Opportunities Ahead
The market for both recreational and medical marijuana is already increasing drastically, which has led to parabolic price movements in many stocks. Recent polls have shown that Americans overwhelmingly support the legalization of marijuana, with Public Policy Polling finding 58% of respondents in favor of legalization efforts compared to just 33% saying that federal resources should be used to prevent state marijuana laws from taking effect.
The tide of legalization has already led to many public companies in the space seeing their market caps expand and share prices rise, but full recreational and medical marijuana legalization would be a much, much larger pie. Capturing just a fraction of the industry’s anticipated $45 billion in annual revenues, could be a windfall for these micro-cap stocks. GrowLife company management feels that they are currently in a best case scenario; having positioned themselves to be exposed not only to national home growing opportunities, but also having the ability to target the commercial-scale operations to scale their revenues.
Looking Ahead for Investors
Investors looking to take advantage of these trends towards the relaxation and legalization of marijuana may want to take a closer look at companies like GrowLife Inc. (OTCQB: PHOT). With existing operations generating revenues, the company is unique among the many development-stage players in the industry. The company has also branched out into many other areas in order to capitalize on the enormous potential ahead – such as its new consulting division.
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Disclosure: The subject security is a client of Emerging Growth, LLC. For full financial disclosures for all Emerging Growth, LLC clients, please visit http://secfilings.com/Disclaimer.aspx
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